Hedge fund indexes show tepid returns in 2014

Broad hedge fund index returns were positive in 2014, led by the 6.1% return of the SS&C GlobeOp Hedge Fund Performance index for the year ended Dec. 31.

Other major hedge fund index returns for year-end 2014 included:

  • Eurekahedge Hedge Fund index, 4.5%;
  • Preqin All-Strategies Hedge Fund index, 3.8%;
  • Greenwich Global Hedge Fund index, 3.5%;
  • HFRI Fund Weighted Composite index, 3.3%;
  • Barclay Hedge Fund index, 3.2%;
  • Hennessee Hedge Fund index, 2.6%;
  • eVestment Hedge Fund Aggregate index, 2.5%.

Hedge funds-of-funds returns also were positive for the year with the Eurekahedge Fund of Funds index returning 3.5% and the HFRI Fund of Funds Composite index, 3.4%.

Broad hedge fund index returns were well below the 13.7% return of the S&P 500 in 2014 and also were significantly lower than prior years.

The 3.3% return of HFRI Fund Weighted Composite index in 2014 was 580 basis points lower than its 9.1% 2013 return and 310 basis points below its 6.4% return in 2012.

The best-performing hedge fund strategies in 2014 were global macro and managed futures strategies.

For example, among HFRI’s strategy-specific indexes, the best performer in 2014 was the trend-following HFRI Macro: Systematic Diversified index, with an 11.1% return, followed by the more inclusive HFRI Macro (Total) index’s 6.2% return.

Specialty managed futures index Newedge CTA had a strong 15.6% return in 2014, while the broader Barclay CTA index ended the year with a 7.7% return.

Some sources attributed hedge fund returns to luck rather than skill.

“This year, given the way global macro trends moved the markets, it was really a matter of the manager’s timing and good fortune as to who made the most money,” said Sol Waksman, founder and president of hedge fund index manager BarclayHedge, in an interview.

Charles Gradante, co-founder of index manager Hennessee Group, agreed. “In 2014, it was better to be lucky than smart. Passive ETF investing outperformed all active management classes (both hedge funds and long-only),” Mr. Gradante said in a company news release.